McKenzie’s Point issued $1,200,000 of 6%, 10-year serial bonds at par on July 1, 20X4. Interest is due semiannually on January 1 and July 1 each year, and one-tenth of the principal is due each July 1. The bond indenture requires that the proceeds be accounted for in a separate fund and used to construct an addition to the maintenance building for the municipal airport, which is accounted for in an Enterprise Fund. Furthermore, the bond agreement requires McKenzie’s Point to set aside airport revenues of $20,000 per month plus one-sixth of the next interest payment each month in a separate fund for debt service from which debt service payments are to be made. The following also occurred during 20X4:
July 2—The city signed a contract with Keith Construction for construction of the addition, $1,200,000.
July 31—The city set aside the required amount to provide for debt service.
August 29—The city received a bill from Keith Construction for $1,200,000 upon completion of the addition. After inspection and approval, the bill was paid.
August 31, September 30, October 31, November 30, and December 31—On each of these dates the city set aside the required amounts to provide for debt service.
Assuming August 31 is the end of the fiscal year of McKenzie’s Point, prepare the general journal entries, including adjusting and closing entries, for the preceding transactions. Ignore interest capitalization.